Apple hit with class action suit

Apple gets a taste of its own lawsuit medicine, as it's hit with a class- …

What goes around, comes around. The recently lawsuithappy Apple Computer has been named in a class-action suit filed by a group consisting of Apple resellers and consumers. Some of the allegations in the lawsuit echo those of another suit filed by other retailers, namely that Apple provides its own stores a competitive advantage at the expense of its resellers.

Additionally, the suit filed in California Superior Court in San Francisco accuses the computer maker of unlawful business practices, misappropriation of trade secrets from its resellers, and repackaging used products as new. According to the complaint, Apple gives its own stores favorable treatment when it comes to product pricing and availability, and uses customer information gained from third-party sales to grab customers away.

In one complaint, longtime Apple dealer Elite Computers & Software contends that Apple sold product in its in-house retail stores at a net loss--an 8% net loss in 2002, Elite figures--eliminating the "level playing field" Apple had promised would exist between independent resellers and Apple's own stores. Apple stores debuted in 2001. Apple's website lists 102 Apple-owned stores, 98 of them in the U.S.

The suit just made it under the wire prior to President Bush's signing the recently-passed class-action lawsuit reform bill. The class action seeks to include everyone who has purchased a Mac since the beginning of 2005.

When Apple started its direct-sales channel a few years ago, questions were immediately raised about how it would manage the task of both supplying and competing against its resellers. From the looks of things, they are doing a great job competing against them and a poor job keeping them well-supplied with new products, especially those in great demand like iPods. Just last month, two long-time independent Apple dealers closed their doors for good, citing Apple's inability to get them new products in a timely fashion.

Apple's retail stores have been pheonomenally successful (although rumors are that the new mini-stores aren't doing as well as their larger counterparts), and the company has repeatedly stated that its revenue growth strategy involves grabbing as big a piece of the sales pie possible. While desiring to maintain a retail presence in major chains such as Best Buy and CompUSA, the company wants to drive as many sales through its web site and retail stores as possible. With such a strategy, it is inevitable that resellers will be left holding the dirty end of the stick.